Thursday, April 30, 2009

The Bad Samaritans

Ha-Joon Chang. Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism New York/Berlin/London: Bloomsbury Press, 2008.

Reviewed by T. Hatch

The neoliberal ideological belief that free trade benefits all economic participants is a risible notion. The agenda of deregulation, privatization, and the opening up of international trade and investment far from bringing prosperity to developing countries has, in the post-1980s world, increased poverty and decreased growth. Professor Chang argues that despite the best efforts the International Monetary Fund, the World Bank, the World Trade Organization (a.k.a. the “Unholy Trinity”), and establishment cheerleaders such as Thomas L. Friedman no wealthy country ever got that way by subscribing to the neoliberal orthodoxy.

Notwithstanding the free trade palaver to the contrary, no developing nation ever attained economic well-being by any other means than a combination of protection, subsidies, and discrimination against foreign investment e.g. South Korea. Besides ignoring the pernicious effects of colonialism and unequal trade deals that neoliberal globalizationalists seem to have overlooked, the post-1982 results of Bad Samaritan economic policies have been slower growth, greater instability, and a greater inequality of income distribution. With the already rich countries controlling 80% of output, 70% of international trade, and 70 to 90% of foreign direct investment, it is difficult to imagine a less developed country ascending to the economic promised land via a “level playing field.”

Chang maintains that “It is actually quite curious that free-market economists who are so much in favor of choice and autonomy do not hesitate to oppose it when it is by developing countries.” This raises the salient question of why it is that the orthodox neoliberals are so intent on forcing developing countries to comply with the international agreements that they are pushing? After all, this is directly counter to their beloved market logic. Why not let the developing countries who refuse to play along be punished or rewarded by investors?

There is also a healthy dose of hypocrisy in all of this Chang asserts. It is essentially a system of Keynesianism for the rich and monetarism for the poor. While the IMF demands that developing countries raise interest rates and run budget surpluses in the face of economic downturn this is precisely the opposite approach currently taken by the United States government. Recently for the paltry sum of twenty billion euros the government of Romania had to genuflect before the IMF, World Bank, and the European Central Bank and agree to austerity measures. Meanwhile, far from the “periphery,” the United States is currently running a fiscal deficit equal to approximately 12% of GDP with interest rates virtually at zero. This moral authority projected from the wealthy west is analogous to that of a four hundred pound aerobics instructor ruthlessly whipping their class into shape.